4 Responses to “ Will China Go Through The “bubble Economy” That Japan Been Through 20 Years Ago? ”

1. Anonymous on November 24th, 2009 12:43 am

   Japan’s currency was already dealt under flexible exchange rate at that time. It was neither floating nor basket system, like today’s China.
   I think Chinese government know if China liberalized the exchange rate, export would suffers huge loss.
   My concern is huge bad loans (noncollectable loans).
   China was announcing the bad-loan-ratio of major banks were around 20 – 30% in the total lendings before 2004. After that, banks (government) pushed forward new loans and increased the denominator (??). The numerator (??) decreased and now around 5-6%.
   It is tricky. Western think-tanks assume the total sum of the bad-loan-ratio is now bigger than before.
   Japan’s worst ratio was around 10+% (I guess. now it’s 1.5%). But this was after the bubble burst. China is still in progress. I hope it won’t be like 40-60% after the burst.
   Anyway, loan issue is always the key of bubble. Look the US sub-prime loan issue today.
   Thinking about the future is good thing.
   Remember, when the world was saying Japan’s economy was in a recession, the GDP was rather stable for 10 years (You can check at IMF w/ JPY base). And, don’t forget that when USD fall, Japanese yen ALWAYS rise (Because JPY moves oppositely in the flex exchange rate.)
   When USD is strong, Japan can earn huge money by export (Check Toyoya and GM’s sales in 2007).
   In fact, at the Asian financial crisis in 1997, Japan didn’t ask other countries any loans, but Japan offered IMF US$30 billion for helping other countries. Check what happened to Asian countries which adopt basket or pegging system against US$.

2. Adrian on November 24th, 2009 4:42 am

   It’s not like no one in China know about it. They would take that into consideration.

3. Astrid Nannerl on November 24th, 2009 7:07 am

   Maybe, but if any of us can tell for sure, we wouldn’t be sitting here. It’s not like you are the first one who raised this concern, and the economic experts in China are not dumb either.

4. ShibaInu ???????? on November 24th, 2009 9:51 am

   Hi, Natsuko-san!
   I don’t think so, China is much bigger than Japan, and at the time of the bubble burst everything in Japan was overvalued(real estate, consumer products, stock shares and many other things), but in China the situation is way different.
   I don’t know much about chinese banks, but the chinese can afford huge investment cause there’s still enough room for many decades of growth, so less risks on the long term.

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